Several banks had concealed their non-performing loans (NPLs). After the fall of the Awami League government on August 5 last year following a student and mass uprising, the interim government took office and initiated efforts to reveal the previously hidden defaulted loans.

At the same time, the period for classifying a loan as non-performing was reduced from six months to three months in line with international standards (Basel III). Since then, the volume of defaulted loans has continued to increase.

On December 31, four months into assuming office, Bangladesh Bank Governor Dr Ahsan H. Mansur said, “We are examining the health of the country’s financial sector. The non-performing loan ratio may reach 25 to 30 percent. At present, it stands at 12.5 percent. By next month, it may rise to 15 percent, then 17 percent, and gradually reach 30 percent. These loans have already defaulted; now they will be formally reflected in the accounts.”

According to reports prepared by commercial banks, between June 30, 2024, and March 30 of the current year—a span of nine months—the outstanding amount of defaulted loans increased by Tk 58,596 crore. The total volume of non-performing loans rose to Tk 2,08,943 crore.

Data show that as of the end of March 2025, the NPL ratio stood at 24.14 percent. At that time, total outstanding loans amounted to Tk 17,41,992 crore. On June 30, 2024, the NPL ratio in the banking sector was 12.54 percent, with total loans at Tk 16,83,396 crore.

Hidden weaknesses come to light

Bangladesh has 61 state-owned, private, and foreign commercial banks. Among them, 23 banks have non-performing loan ratios exceeding 15 percent. For some banks, the NPL ratio ranges between 50 and 99 percent. A few of these institutions have long been burdened by high default rates, while others saw their NPL volumes double over the past nine months.

NPL ratios above 15% in state-owned banks

Among the nine state-owned banks, six reported an average NPL ratio of 45.79 percent. The three specialised banks posted a combined NPL ratio of 14.47 percent. At two banks, nearly three-quarters of their loans are non-performing. However, no abnormal increase in defaulted loans has occurred in these banks over the past nine months.

According to available data, in June 2024, Agrani Bank’s defaulted loans stood at Tk 21,324.85 crore, which was 30.59 percent of its total loan portfolio. By March 2025, this amount rose to Tk 29,720.75 crore, accounting for 41.35 percent of its total loans. Over nine months, the bank’s non-performing loans increased by Tk 8,396 crore.

At Bangladesh Development Bank, the current volume of non-performing loans is Tk 980.72 crore, which represents 45.68 percent of its total loans. In June 2024, the bank’s defaulted loans were Tk 943.36 crore, or 42.30 percent of its total.

Basic Bank’s non-performing loans currently amount to Tk 8,646.20 crore, with a default ratio of 69.34 percent. Nine months earlier, the bank’s NPL stood at Tk 8,256 crore, with a ratio of 64.45 percent.

In the state-owned sector, Janata Bank reported defaulted loans of Tk 70,846 crore, accounting for 74.76 percent of total loans. Nine months prior, its NPL volume was Tk 48,045 crore, and the default rate was 52.55 percent.

Rupali Bank’s non-performing loans amount to Tk 17,123 crore, or 35.62 percent of total loans. Nine months earlier, the figure was Tk 10,463.33 crore, with a default rate of 23 percent.

Sonali Bank, another state-owned institution, reported NPLs of Tk 19,091 crore, which is 21.11 percent of its total loans. Nine months ago, this stood at Tk 13,496 crore, with a default rate of 14.81 percent.

At Krishi Bank, under government ownership, defaulted loans stand at Tk 4,902 crore, or 14.11 percent of the bank’s total portfolio. Nine months earlier, the bank had NPLs of Tk 4,323 crore, accounting for 12.72 percent of total loans.

Rajshahi Krishi Bank, another specialised bank, reported non-performing loans of Tk 1,278 crore, which is 17.26 percent of its total loans. Nine months earlier, this figure was Tk 1,241.54 crore, with an NPL ratio of 16.89 percent.

Among the comparatively younger state-owned banks, Probashi Kallyan Bank has begun closely trailing behind its struggling counterparts—Janata, BDBL, and BASIC Bank—in terms of non-performing loans. Within just a decade of its establishment, the bank’s NPL ratio has reached 11 percent, with defaulted loans amounting to Tk 314 crore out of a total loan portfolio of Tk 2,742 crore.

Among the state-owned banks, Sonali and Rupali maintain relatively lower default rates, whereas the NPL situation at other public banks remains dire.

Private banks report NPLs above 15%

Bangladesh has 43 private banks, with an average non-performing loan ratio of 20.16 percent. Of these, 12 banks have NPL ratios exceeding 15 percent, while five institutions report default rates ranging from 50 to 90 percent.

Among private commercial banks, AB Bank posted an NPL ratio of 26.32 percent in March 2025, with defaulted loans totaling Tk 8,840.52 crore. Nine months earlier, in June 2024, the figure stood at Tk 9,795 crore, with an NPL rate of 30.95 percent. AB Bank is the only domestic or foreign bank to have reduced its NPL volume during the interim government’s tenure.

Al-Arafah Islami Bank’s current non-performing loan volume stands at Tk 7,798.46 crore, which is 15.57 percent of its total loans. Nine months earlier, its NPL figure was Tk 3,110.23 crore, accounting for 6.47 percent of total loans.

Bangladesh Commerce Bank reported defaulted loans of Tk 1,530 crore, with an NPL ratio of 67.18 percent. On June 30, 2024, the figure was Tk 1,331.63 crore, with a default rate of 56 percent.

Bank Asia currently holds NPLs totaling Tk 4,055.34 crore, or 14.35 percent of its total loans. Nine months earlier, its default rate was 7.85 percent, with a volume of Tk 2,385.89 crore.

First Security Islami Bank’s non-performing loans have surged to Tk 22,646 crore, or 36.63 percent of total loans. Nine months prior, its NPLs stood at Tk 2,690.50 crore, with a rate of 4.53 percent.

Global Islami Bank’s defaulted loans now stand at Tk 7,942.10 crore, representing 54.36 percent of its total loans. Nine months earlier, the NPL volume was Tk 327.12 crore, with a rate of 2.36 percent.

ICB Islami Bank reported NPLs amounting to Tk 665.42 crore, with a staggering default ratio of 91 percent. Nine months earlier, its NPL figure was Tk 677.77 crore, with a default rate of 89 percent.

Islami Bank, the largest commercial bank in the country, now has NPLs totaling Tk 47,617.83 crore, equivalent to 27.38 percent of its total loan portfolio. Nine months earlier, the figure stood at Tk 7,724.46 crore, with a significantly lower rate of 4.42 percent.

National Bank's non-performing loans have reached Tk 27,352 crore, or 64 percent of total loans. On June 30, 2024, the volume was Tk 20,929.17 crore, with an NPL ratio of 49 percent.

NBR Bank reported defaulted loans of Tk 1,264.45 crore, with a rate of 18.22 percent. In June 2024, its NPL volume was Tk 946 crore, with a ratio of 5.83 percent.

NRB Commercial Bank currently has NPLs totaling Tk 2,421.88 crore, which is 16.20 percent of its total loans. Nine months earlier, the figure was Tk 1,203 crore, with a default rate of 7.29 percent.

Padma Bank’s non-performing loan volume is Tk 4,878.17 crore, with an NPL ratio of 87.18 percent. Nine months earlier, the figure was Tk 4,881.60 crore, with a default rate of 85.73 percent.

Premier Bank’s non-performing loans have climbed to Tk 9,817 crore, with a default ratio of 29 percent. Nine months earlier, the volume was Tk 1,771.66 crore, with a rate of 5.79 percent.

Social Islami Bank’s NPLs now stand at Tk 14,349.72 crore, representing 37.58 percent of its total loans. Nine months earlier, the volume was Tk 1,778.84 crore, with a default rate of 4.77 percent.

Union Bank’s non-performing loans (NPLs) have surged to Tk 25,303 crore, raising its default rate to a staggering 89.81 percent. Just nine months earlier, the bank’s NPL stood at Tk 1,046 crore, or 3.42 percent of its total loan portfolio.

At United Commercial Bank, the amount of defaulted loans reached Tk 8,628.35 crore, with an NPL ratio of 14.67 percent. Nine months ago, this figure was Tk 3,313.12 crore, or 6 percent of total loans.

Among private banks, AB Bank remains the only institution whose non-performing loan situation has not deteriorated but has instead shown improvement.

One foreign bank records 99% NPL ratio

Of the nine foreign banks operating in Bangladesh, eight have maintained international standards and kept their NPLs under control. The exception is National Bank of Pakistan, which has reported that 99 percent of its total loan portfolio is in default. Its current NPL volume stands at Tk 1,357.54 crore. Nine months earlier, the bank’s NPL ratio was 96.1 percent.

Economists' comments 

Economists have warned that the rate of non-performing loans will rise further given the current condition of the financial sector. Since taking office, the new Bangladesh Bank governor has begun enforcing international loan management standards, which is expected to result in 30 percent of loans being automatically classified as defaulted. Dr Toufic Ahmed Choudhury, former director general of the Bangladesh Institute of Bank Management (BIBM), has recommended establishing clear management processes to bring the NPL situation to a tolerable level.

Speaking to Banglanews, Dr Choudhury noted that under the newly implemented Basel III standards, the repayment period for loan installments has been shortened from six months to three months. As a result, any loan unpaid for three months is now considered non-performing. He emphasized that due to this shift, the NPL ratio is bound to exceed 30 percent.

He further explained that under Basel III classification, loans become substandard if not repaid within three to six months, doubtful between six to twelve months, and bad debt if overdue for more than a year. Banks must also maintain provisioning in different proportions for each category. Until December of the previous year, the repayment threshold was six months, so the new timeline will cause many borrowers to default in the initial stages of non-repayment.

Dr Choudhury added that after the political change on 5 August, many businesspeople fled the country and failed to repay their installments. Others have defaulted due to ongoing political uncertainty. He also cited past financial scandals in various banks as key contributors to the current rise in NPLs.

According to him, the situation has improved in terms of governance, with fewer disreputable directors exerting undue influence on lending decisions. Several banks have been restructured, and those that haven’t yet reformed have become more cautious.

What’s the way out

Banks trapped in high-default situations not only have their capital stuck in bad loans but must also make provisioning against 25 to 100 percent of these loans. Provisioning requires banks to set aside a specific portion of their profits based on the type of NPL—effectively immobilizing their capital, weakening institutional strength, and reducing the financial sector’s capacity.

To overcome this, Dr Choudhury urges close monitoring of the loan management system. He proposes dividing NPLs into two categories: willful defaulters and involuntary defaulters—those who have defaulted due to genuine socio-political or economic circumstances. The response to each must differ. Willful defaulters will be harder to manage and should be clearly identified.

He recommended that every bank establish a "workout unit" to engage with defaulters, understand why defaults occurred—whether due to lack of market access, delayed export payments, or shortage of raw materials—and explore options for loan restructuring. Borrowers who defaulted unintentionally are more likely to repay once given proper support. However, to address willful defaulters, he called for the creation of asset management companies and even suggested closing down banks that have no realistic chance of recovery.

Although implementing Basel III has long been on the agenda, the policy faced delays due to concerns that it would hinder business, increase defaults, or lead to closures. Some exploited these fears to avoid accountability. Dr Choudhury emphasized that now is the time for full enforcement of Basel III. Delaying further will only compound the problem, and once a political government is in power, implementation will become significantly more difficult.